Hepatic glucose output (HGO) is a highly regulated process controlled by a variety of endocrine, metabolic, and neural mechanisms. The complexity of HGO regulation and the difficulty in measuring intrahepatic glucose fluxes have limited our understanding of the control of HGO in vivo. Recent method-ologic advances, however, have aided in the measurement of gluconeogenesis and glycogenolysis, the two processes that contribute to HGO. In addition, the recent discovery that insulin, the major physiologic suppressor of HGO, has both direct and indirect effects on the liver has altered our understanding of how insulin acts under normal conditions. Insulin appears to have a direct, antiglucagon effect in suppressing HGO but also acts to suppress lipolysis at the adipocyte. Much of the effect of insulin in suppressing liver glucose output appears to be mediated by the concomitant decline in free fatty acids. Free fatty acids may also be important in the modulation of HGO by other hormones such as cate-cholamines and glucose. The importance of lipolysis in the physiologic control of glucose homeostasis helps us to understand how this system might become compromised in diabetes.